All,
I have just started investing in MFs for the first time in my life so please bear with me if my questions come across nave or silly. I do not understand Growth option properly.
I have read about Dividend option, reinvestment, and about Growth. People decide on the options based on their needs. Since my reason for investing is a retirement fund for myself, I have taken up Growth option on two funds this year, SBI Magnum Tax Gain and Sundaram BNP Paribas and invested lumpsum amount of 30k each.
Basic rule of the thumb for Growth options that I understand are:
1. Money the fund makes remains in the fund.
2. NAV Value of the fund goes up over time and will be generally higher than the dividend options of the same fund.
3. Units invested will remain the same. (Unlike Dividend reinvestment)
I have been reading up literature on MFs and I am getting more and more confused. S-BNP-Paribas says in their fund presentation that Rs 10,000 invested at inception on growth option would today be worth Rs 49,032. What I don't understand is how?
In 1999, the NAV value was 11.01. If I invested 10,000 then I would have 10,000/11.01 = 908.2652 units.
The current NAV is around 23.4288 making my investment worth 23.4288*908.2652 = Rs 21,279 today.
I know I am missing something obvious here and its driving me crazy. How does the investment grow and compound to 49k and not 21k?
I have just started investing in MFs for the first time in my life so please bear with me if my questions come across nave or silly. I do not understand Growth option properly.
I have read about Dividend option, reinvestment, and about Growth. People decide on the options based on their needs. Since my reason for investing is a retirement fund for myself, I have taken up Growth option on two funds this year, SBI Magnum Tax Gain and Sundaram BNP Paribas and invested lumpsum amount of 30k each.
Basic rule of the thumb for Growth options that I understand are:
1. Money the fund makes remains in the fund.
2. NAV Value of the fund goes up over time and will be generally higher than the dividend options of the same fund.
3. Units invested will remain the same. (Unlike Dividend reinvestment)
I have been reading up literature on MFs and I am getting more and more confused. S-BNP-Paribas says in their fund presentation that Rs 10,000 invested at inception on growth option would today be worth Rs 49,032. What I don't understand is how?
In 1999, the NAV value was 11.01. If I invested 10,000 then I would have 10,000/11.01 = 908.2652 units.
The current NAV is around 23.4288 making my investment worth 23.4288*908.2652 = Rs 21,279 today.
I know I am missing something obvious here and its driving me crazy. How does the investment grow and compound to 49k and not 21k?